The European Commission has on the 4th October 2017 published a communication to the European Parliament, the Council and the European Economic and Social Committee on the “Follow-up to the Action Plan on VAT towards a single EU VAT Area – Time to Act”.
The proposals include a major reform to the current system of intra-community supplies of goods in virtue of which goods are exempt from VAT in the Member State of origin and VAT is accounted for in the Member State of destination. Under the proposed “definitive” regime a cross-border transaction of goods will only be taxed in the Member State of destination.
The EU aims to modernise the common VAT system by rendering it simpler, more efficient, robust and fraud-proof. The new system is specifically targeted to counter VAT carousel fraud, which is resulting in major VAT revenue losses every year. The Commission has set out a road map for the implementation of the new rules which if adhered to and subject to agreement by the Member States should see the new rules coming into force in 2022.
Under the new proposed system, a supply of goods which are transported/dispatched cross-border is taxed in the Member State where the transport/dispatch of the goods to the customer ends and the supplier is to charge VAT at the applicable VAT rate in such a Member State.
The customer receiving the goods has to pay the VAT unless he is declared a “Certified Taxable Person” by the Member State where he has established his business
Suppliers will have to register under the “One Stop Shop” system to account for VAT due on their cross-border transactions. They will file one return and makes one payment to the Tax Authority in the Member State in which they are established in respect of all cross-border transactions of goods carried out. Such Member State will then transfer the VAT collected to the other Member States.
This means that the requirement to file a Recapitulative Statement will be eliminated once the new rules come into force.
